Transcript Evaluating Strategies of Diversified Companies

Evaluating Strategies of
Diversified Companies
Evaluation Steps
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Identify current strategy
Evaluate long-term industry attractiveness
Evaluate competitive strengths of business units
Identify cross-business strategic fits
Determine whether strengths match requirements
Rank business units on performance and prospects
Decide prospects for resource allocation
Craft strategy to improve corporate performance
Present Corporate Strategy
The extent to which the firm is diversified
Pursuing related or unrelated diversification
Scope- domestic to global
Moves to add new businesses
Moves to divest businesses
Recent moves to boost key businesses
Management efforts to capture synergy
Percentage of resources allocated to each
unit
Industry Attractiveness
Evaluate the industries in which the firm
is invested from three angles
Each industry in and of itself
In comparison with other industries in the
portfolio
The portfolio of industries as a whole
Industry Attractiveness
Market size and growth rate
Intensity of competition
Opportunities and threats
Seasonal and cyclical factors
Resource requirements
Presence of strategic fits
Industry profitability
Social, political, regulatory and environmental factors
Uncertainty and business risk
Competitive Strengths of
Business Units
Relative market share
Costs relative to competitors
Ability to match or beat rivals on product attributes
Ability to exercise bargaining leverage
Caliber of partnerships and alliances
Ability to develop synergy
Technology and innovation capabilities
How well business matches industry’s KSF
Brand name recognition and reputation
Profitability relative to competitors
BCG Matrix
A method of evaluating businesses relative to
the growth rate of their market and the
organization’s share of the market
The matrix classifies the types of businesses
that a diversified organization can engage as
“Dogs” have small market shares and no growth prospects
“Cash cows” have large shares of mature markets
“Question marks” have small market shares in quickly
growing markets
“Stars” have large shares of rapidly growing markets
BCG Matrix
GE Business Screen
A method of evaluating business in a
diversified portfolio along two dimensions,
each of which contains multiple factors
Industry attractiveness
Competitive position (strength) of each firm in the
portfolio
In general, the more attractive the industry
and the more competitive a business is, the
more resources an organization should invest
in that business
GE Business Screen